JH-1 IFP.pdf

INCENTIVE FEE PLAN

COST AND PERFORMANCE

FOR

PHILIPPINES OPERATIONS SUPPORT CONTRACT

IV (POSC IV), REPUBLIC OF THE PHILIPPINES

RFP No. N62742-21-R-3507

10 March 2021

ATTACHMENT JH-1

Table of Contents

Section Title Page

1. Introduction 2

2. Organization 2

3. Responsibilities 2

4. Evaluation Periods 3

5. Cost Incentive Fee Processes/Evaluation Guidelines 4

6. Performance Incentive Fee Processes/Evaluation Guidelines 5

7. Incentive Plan Changes 7

8. Contract Termination 7

Enclosures

Enclosure Title

1. CPIF Examples of Fee Computation

2. Sample Contractor Performance Evaluation Report

3. Performance Assessment Process Flow Chart

4. Performance Assessment Plan (PAP)

1. INTRODUCTION

a. The Government intends to award a Cost-Plus-Incentive-Fee (CPIF) Contract with multiple-incentives in accordance with FAR Parts 16.405-1 and 16.402-4. The two incentives will be a Cost Incentive (FAR Part 16.402-1) and a Performance Incentive (FAR Part 16.402-2). This plan contains the cost and performance incentive fee provisions for Request for Proposal (RFP) No. N62742-21-R-3507. The contract performance period includes a base period and four (4) 12-month option periods, one (1) 3-month demobilization, and one (1) six-month extension of services period. The Contractor is required to provide base operation support services in various locations within the Republic of the Philippines. The contractor may be requested to provide future support at foreign locations within the regions of South East Asia, North East Asia, South Asia and Oceania.

b. This plan describes the evaluation method the Government will use to assess the Contractor’s performance prior to determining eligibility for any cost or performance incentive fee under this contract.

c. The Contractor shall propose a total target fee percentage; which shall be divided EQUALLY between the two incentive fee pools. RFP Attachment JB-3 “Incentive Fee Percentages and Pools” contains the fee percentages, a fee adjustment formula, and minimum/maximum fee percentages. NOTE: The fee adjustment formula and minimum/maximum fee percentages apply only to the Cost Incentive.

d. The total target fee amount (cost incentive and performance incentive) shall be increased/decreased in the same percentage as initially proposed when change in requirements warrant an increase/decrease in total target fee. Adjustments to target fee for any contract changes will be negotiated at time of contract modification. The target fee shall not be adjusted for overruns to the target cost.

e. The Government reserves the right to alter this plan unilaterally to reflect any changes to the evaluation criteria. The Contractor will be informed of these changes in a timely manner, and will be given a copy of the plan 15 calendar days in advance of the evaluation period(s) to which it applies.

2. ORGANIZATION

The Government Representatives administering the incentive fee consists of the Chief of Contracting Office NAVFAC Pacific (CCO), Contracting Officer (KO), Contracting Officer Representative (COR) and Field COR.

3. RESPONSIBILITIES

a. Chief of Contracting Office, NAVFAC Pacific (CCO). Primary responsibilities of the CCO are (i) review findings and recommendations of the COR and Field COR, (ii) review the Contractor’s self-evaluation/rebuttal; if any, (iii) review any other source of pertinent information, and (iv) determine the Target Fee earned.

b. Contracting Officer (KO). The KO will evaluate the Target Cost and Actual Cost at the end of each twelve (12) month performance period based on the cost formula in Paragraph 5b. The KO will provide the Cost Incentive fee recommendation and any supporting information to the NAVFAC Pacific CCO. Primary responsibilities of the PCO are to notify the Contractor in writing of the decision, review and approve performance incentive evaluation input into the applicable performance assessment database (i.e., CPARS), and serve as the liaison between the Contractor and Government personnel.

c. Contracting Officer’s Representative (COR). The COR is appointed by the Contracting Officer. The COR is responsible for consolidating the Monthly Performance Assessment Summary (MPAS) for the performance incentive and for calculating the numerical average based on the adjectival ratings. The COR will assist in providing the NAVFAC CCO/KO the results of the performance incentive fee (profit) numerical score and percentage earned.

e. Field COR. The field COR is appointed by the Contracting Officer. The COR is the on-site technical representative responsible for monitoring the performance of work under the contract, ensuring contractor’s performance evaluations are accomplished in a timely manner, prepare and forward the draft MPAS summarizing findings to the NAVFAC PAC COR. Other detailed responsibilities/duties are outlined in the COR appointment letter.

e. Technical Points of Contact (TPOC)/Subject Matter Expert (SME).

TPOC/SMEs may be used by the CORs to assist in administration, oversight, and performance assessment. TPOC/SME are usually the on-site government technical personnel providing assistance to the COR(s), but they are not formally appointed positions; however, technical experts are often required for successful oversight of contractor performance and may be used at the discretion of the COR.

f. Performance Assessment Board (PAB). The PAB is comprised of key technical and administrative personnel appointed in writing by the KO. The PAB membership consists of the following: NAVFAC PAC COR, Field COR, Contracting Officer and/or NAVFAC PAC Lead Contract Specialist, client Program Manager. The PAB will convene either quarterly, tri-annually, or annually to review and evaluate Contractor performance and makes recommendations to develop overall input for official CPARS ratings and relevant comments.

4. EVALUATION PERIODS

The Cost Incentive Fee evaluation period will occur every twelve (12) months (yearly) and the Performance Incentive Fee evaluation period will occur every four (4) months (tri-annually) after commencement of contract. However, on a monthly basis, the Field CORs will provide to the COR for approval a Performance

Assessment Report which will assign adjectival ratings to the Annexes/Technical Specifications identified in the Performance Assessment Plan (PAP), Attachment (1).

Monthly performance meetings will be conducted between the Government and the Contractor to discuss performance during the current evaluation period to ensure quality performance, effective cost controls, and positive communication.

The KO or COR will provide the MPAS to the Contractor on a monthly basis by either a briefing, meeting, conference call, or by way of email to discuss/communicate performance during the current evaluation period to ensure quality performance, effective cost controls, and positive communication. In situations where the Contractor feels the ratings are unfair, the Contractor can submit a rebuttal to the KO within seven (7) calendar days after the MPAS briefing/meeting/conference call/or email. The KO will have the exclusive right to make a determination as to the merit of the Contractor’s position and make adjustments to the adjectival/numerical rating, if warranted. The KO will render a decision on the results within seven (7) calendar days after receipt of the Contractor’s rebuttal.

5. COST INCENTIVE FEE PROCESSES/EVALUATION GUIDELINES (FAR Part 16.402-1)

The Cost Incentive Fee will incentivize the Contractor to effectively manage contract costs. The contract includes a target cost, a target fee, a minimum and maximum fee, and a fee adjustment formula.

a. Cost Incentive Fee Pool Amount. The Cost Incentive Fee Pool is established by applying the Offeror’s proposed Cost Incentive Fee percentage (NOTE:

1/2 of the Offeror’s proposed Total Target Fee percentage) against the negotiated Total Target Cost of this contract. See RFP Attachment JB-3 - Incentive Fee Percentages and Pools and ELIN Schedules.

b. Cost Incentive Fee Adjustment Formula. The Government has established the fee adjustment formula for both Overruns and Underruns at 50% Government and 50% Contractor (FAR clause 52.216-16 Incentive Price Revision – Firm Target). The fee adjustment formula provides that:

1. Actual cost that is BELOW the target cost will result in an upward adjustment of target cost fee incentive [Earned Fee Cost Incentive = Target Fee Cost Incentive + 50%(Actual Cost Below Target Cost)];

2. Actual cost that MEETS the target cost will result in the target cost fee incentive [Earned Fee Cost Incentive = Target Fee Cost Incentive]; and

3. Actual cost that EXCEEDS the target cost will result in a downward adjustment of target cost fee incentive, or even a net loss [Earned Fee Cost Incentive = Target Fee Cost Incentive – 50%(Actual Cost Exceeding Target Cost)].

See example of an Overrun and Underrun scenario in Enclosure 1.

c. Minimum and Maximum Fee Percentages (FAR Part 16.405-1). The Government has established Minimum and Maximum fee percentages (RFP Attachment JB-3 and FAR 52.216-10(e) Incentive Fee Payable) for the Cost Incentive Fee Pool only. When calculating fee adjustments, if total allowable costs are greater than or less than the range of costs within which the fee-adjustment formula operates, the contractor is paid total allowable costs, plus the minimum or maximum fee. These minimum and maximum fees serve to limit both underrun and overrun fee calculations. In the event of a large underrun, the most fee the Contractor can earn is the maximum fee (on Cost). In the event of a large overrun, the Contractor is guaranteed the minimum fee (on Cost).

d. Notification to Contractor. Once the CCO has determined the cost incentive fee earned, if any, for the period, a letter will be prepared to notify the Contractor of the fee determination. The letter will include the amount of cost incentive fee earned for the period and any adjustment necessary to recoup payments already made by the Government for cost incentive fee or provide invoicing instructions for the earned cost incentive fee.

e. Unearned Cost Incentive Fee. Unearned cost incentive fee will not be carried forward into subsequent performance periods. All unearned cost incentive fee will be de-obligated from the contract by contract modification(s).

f. Duration of Evaluation. The estimated time for completion of the

Government’s evaluation is approximately ninety (90) calendar days after all costs have been calculated and finalized by the contractor for the evaluation period.

6. PERFORMANCE INCENTIVE FEE PROCESSES/EVALUATION GUIDELINES

The Performance Incentive Fee will incentivize the Contractor to meet and/or exceed performance objectives and standards, and to provide, as a minimum, the types, levels, and quality of services that would support the Philippines Operations Support Contract (POSC) in various locations within the Republic of the Philippines. The contractor may be requested to provide future support at foreign locations within the regions of South East Asia, North East Asia, South Asia and Oceania.

a. Performance Incentive Fee Pool Amount. The Performance Incentive Fee

Pool is established by multiplying the Offeror’s proposed Performance Incentive Fee percentage (NOTE: 1/2 of the Offeror’s proposed Total Target Fee percentage) by the negotiated Total Target Cost of this contract. See RFP Attachment JB-3 - Incentive Fee Percentages and Pools and ELIN Schedules.

b. General Characteristics of Levels of Performance. The General

Characteristics of Levels of Performance contained in the Performance Assessment Plan (PAP), Attachment (1) will be utilized to describe performance characteristics that represent a level of performance. The General Characteristics of Levels will be used to select the level of performance that best characterizes the Contractor’s overall performance for the evaluation period.

c. Monthly and End-of-Period Evaluations. At the conclusion of each month, the Government will identify and convey in writing to the Contractor specific areas that may negatively impact the overall performance evaluation. This is generally accomplished via the Monthly Performance Assessment Summary (MPAS), discussed in Enclosure (2). The Contractor may submit a rebuttal to the KO within seven (7) days following each evaluation period. The KO will have the exclusive right to make a determination as to the merit of the rebuttal and will render a decision within seven (7) calendar days after receipt of the Contractor’s rebuttal.

d. Performance Incentive Fee Determination Process. If the Contractor fails to maintain a satisfactory level of performance during the evaluation period, the Government reserves the right to deny the issuance of any available performance incentive fee for that evaluation period. The Evaluation Process is shown below:

(1) Adjectival ratings will be assigned by the Field CORs for each Annex/Sub- Annex through the Performance Assessment Process described in the Performance Assessment Plan. The Performance Assessment Process is summarized in Enclosure 2.

(2) At the end of each tri-annual period (4 months), the COR will consolidate and calculate a tri-annual period average numerical rating for each Annex/Sub-Annex utilizing the adjectival ratings from the MPAS worksheets. The adjectival ratings are defined in the Performance Assessment Plan. The numerical score assigned to the adjectival ratings are as follows:

Exceptional = 100 Very Good = 85 Satisfactory = 75 Marginal = 0 Unsatisfactory = 0

The performance incentive fee earned will be determined by calculating the average numerical score for each annex for the tri-annual period. An example of this calculation is provided in Enclosure 3. The COR will then forward the tri-annual period average numerical score and performance incentive earned to the CCO for final approval/concurrence.

e. Notification to Contractor. Once the CCO has determined the performance incentive fee earned, if any, for the period, a letter will be prepared to notify the Contractor of the performance fee determination.

f. Unearned Performance Incentive Fee. Unearned performance incentive fee will not be carried forward into subsequent performance periods. All unearned performance incentive fee will be de-obligated from the contract by contract modification(s).

g. Duration of Evaluation. The estimated time for completion of the

Government’s evaluation is approximately forty-five (45) calendar days after the conclusion of the evaluation period.

7. INCENTIVE PLAN CHANGES

a. By a written notice to the Contractor prior to the beginning of an evaluation period, the KO may unilaterally change any material contained in this Plan, which may include changes to the evaluation criteria.

b. Any changes to the IFP will be forwarded to the Contractor at least 15 calendar days prior to the evaluation period(s) to which it applies.

c. Changes affecting the current evaluation period must be made by mutual agreement of both parties.

8. CONTRACT TERMINATION

In the event that the contract is terminated in its entirety, the portion of the target fee payable shall not be subject to an increase or decrease. The termination shall be accomplished in accordance with other applicable clauses of this contract.

Enclosure 1 CPIF examples

COST PLUS INCENTIVE FEE

EXAMPLES OF FEE COMPUTATION

For illustrative purposes, the following are examples of incentive fee computations for underrun and overrun scenarios using the following assumptions:

Contract

Target Cost

Target Fee

$ 30,000,000

Cost Incentive 4% $ 1,200,000

Performance Incentive 4% $ 1,200,000

Total Target Fee 8% $ 2,400,000

Maximum Fee (on Cost)

6%

$ 1,800,000

Minimum Fee (on Cost) 1% $ 300,000

Fee Adjustment Formula Govt

50%

Contractor 50%

UNDERRUN TARGET COST:

This an UNDERRUN example of a contract where the actual cost is $28,600,000 vice the target cost of $30,000,000. The target fee is 8% (4% cost; 4% performance). The maximum fee on cost is 6% (4% Cost Incentive + 2%); minimum fee on cost is 1%; and fee adjustment formula 50/50 (these % apply only to cost incentive). Another assumption is that 87% of the performance incentive fee pool was earned.

Underrun

Contract Actuals Computed Fee Total Paid Target Cost $ 30,000,000 $ 28,600,000 $ 28,600,000 $ 28,600,000 Target Fee Cost Incentive 4% $ 1,200,000 Performance Incentive 4% $ 1,200,000 $ - Total Target Fee 8% $ 2,400,000

Underrun (Overrun) $ 1,400,000 Subtotal

Maximum Fee (on Cost) 6% $ 1,800,000 Minimum Fee (on Cost) 1% $ 300,000

Fee Adjustment Formula Govt 50% Kr 50%

COST 4% $ 1,200,000 $ 1,200,000

COST UNDERRUN ADJ. $ 700,000

TOTAL $ 1,900,000 $ 1,800,000

PERFORMANCE 4% $ 1,200,000 $ 1,044,000 $ 1,044,000 $ 1,044,000

87% $ 2,944,000 $ 2,844,000 $ 32,400,000 $ 31,444,000

In this example the fee computed was as follows:

• Cost Incentive Pool $1,200,000 +(50% x $1,400,000 underrun) = $1,900,000;

but limited to $1,800,000 maximum fee.

• Performance Incentive Pool 87% of $1,200,000 = $1,044,000 o Total Cost + Performance Incentive Fee= $2,844,000

OVERRUN TARGET COST:

This an OVERRUN example of a contract where the actual cost is $32,000,000 vice the target cost of $30,000,000. The target fee is 8% (4% cost; 4% performance). The maximum fee on cost is 6% (4% Cost Incentive + 2%); minimum fee on cost is 1%; and fee adjustment formula 50/50 (these % apply only to cost incentive). Another assumption is that 87% of the performance incentive fee pool was earned.

Overrun

Contract Actuals Computed Fee Total Paid Target Cost $ 30,000,000 $ 32,000,000 $ 32,000,000 $ 32,000,000 Target Fee Cost Incentive 4% $ 1,200,000 Performance Incentive 4% $ 1,200,000 Total Target Fee 8% $ 2,400,000

Underrun (Overrun) $ (2,000,000) Subtotal

Maximum Fee (on cost) 6% $ 1,800,000 Minimum Fee (on cost) 1% $ 300,000

Fee Adjustment Formula Govt 50% Kr 50%

COST 4% $ 1,200,000 $ 1,200,000

COST OVERRUN ADJ $ (1,000,000)

TOTAL $ 200,000 $ 300,000

PERFORMANCE 4% $ 1,200,000 $ 1,044,000 $ 1,044,000 $ 1,044,000

87% $ 1,244,000 $ 1,344,000 $ 32,400,000 $ 33,344,000

In this example the fee earned was as follows:

• Cost Incentive Pool $1,200,000 - (50% x $2,000,000 overrun*) = $200,000, but subject to minimum fee of 1% =$300,000

• Performance Incentive Pool 87% of $1,200,000 = $1,044,000 o Total Cost + Performance Incentive Fee Earned = $1,344,000

*Note that allowability of the $2,000,000 target cost overrun is subject to FAR 52.232-2 Limitation of Cost requirements

Monthly Performance Assessment Summary Process

Start

Field COR/Performance evaluators assess contractor performance utilizing

Performance Assessment

Worksheets (PAWs) for each

Annex/Sub-Annex; assigns adjectival rating

Field COR / Performance evaluators prepare

Monthly Performance

Assessment Summary

(MPAS) by consolidating

PAWs by Annex / Sub-

Annex and assign ratings

If contractor disagrees with ratings, submits rebuttal to KO within 7 days after briefing/review

Field COR / Performance evaluators provides/discusses

MPAS Govt team. KO briefs

MPAS ratings results to

Contractor

KO reviews all documentation and makes final determination on

MPAS rating

KO notifies contractor in appx 7 days of final determination on rebuttal

End

Enclosure 2

*Performance Fee Available Pool is: $30,000,000 (Target cost) x 1.33% (3 performance periods/year) = $399,000

Enclosure 3 e